Droom targeting $30-50 million in its next round of funding

According to industry estimates, the country's domestic automobile sector, including services, is the third-largest in the world, valued at about $125 billion, and is expected to touch $250 billion by 2020.Biswarup Gooptu | ET Bureau | November 21, 2016, 12:07 IST

NEW DELHI: Online marketplace for used automobiles and auto services Droom has begun early talks with potential investors, with the two-year-old venture targeting $30-50 million in its next round of funding, expected to close early next year.

Given that the company already counts a number of prominent investors that are Chinese in origin, the early players that have thrown in their hats for the new round of equity financing, are also believed to be from the same region, including Hong Kong, or have deep links to the country's pool of investors, according to sources with direct knowledge of the developments.

Sandeep Aggarwal, chief executive of Droom, declined to comment when contacted by ET. The company competes with the likes of Warburg Pincus and Temasek-backed CarTrade and Google Capital and Hillhouse Capital-backed CarDekho, among others. The discussions also come at a time when there has been some uptick in Series B and above rounds, after a lethargic 12-15 months that saw investors put away their cheque books, while at the same time, urge portfolio companies to focus on unit economics and show paths to profitability.

In a conversation with ET earlier, Aggarwal, who had earlier cofounded online managed marketplace ShopClues, had said that Droom's gross annualised sales were about Rs 1,500 crore with the company targeting Rs 2,500-3,000 crore in GMV by the end of the fiscal ending March 2017."By December, we expect to do an nualised gross sales of Rs 4,500-5,000 crore, with December sales projected at about Rs 400 crore," Aggarwal said. Annualised revenue for the year ending March 2017, according to the CEO, is expected to be about Rs 60 crore. "C2C is now picking up for us, and we see it contributing a bit more to our balance sheet than B2C going forward. Apart from that our services is expected to grow faster than automobile sales," Aggarwal told ET.

The company has four different revenue streams -its core transaction platform, premium subscription services, advertising, and in-house developed enterprise products, such as algorithmic pricing engine Orange Book Value and auto inspection and verification service provider Eco. "About 15% of our sellers have signed on for the subscription services, and we expect this to go up to 40% by December 2017," Aggarwal added.

According to industry estimates, the country's domestic automobile sector, including services, is the third-largest in the world, valued at about $125 billion, and is expected to touch $250 billion by 2020. However, the online segment currently contributes less than 1% to the overall figures, which is expected to grow to 8% over the next three to four years.

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In 2018, automobile demand remained robust despite the slowdown overcast in the last three months of year. All segments reported strong double-digit growth in the calendar year ending December 31 except passenger vehicles which reported a growth of 5 per cent. Three-wheelers sales grew fastest followed by commercial vehicles, two-wheelers, and passenger vehicles. The overall automobile sales crossed 26.7 million units for the first time.

In 2018, automobile demand remained robust despite the slowdown overcast in the last three months of year. All segments reported strong double-digit growth in the calendar year ending December 31 except passenger vehicles which reported a growth of 5 per cent. Three-wheelers sales grew fastest followed by commercial vehicles, two-wheelers, and passenger vehicles. The overall automobile sales crossed 26.7 million units for the first time.